Accelerated Growth of Light Crude Production is Driving the United States to Become a Global Oil Exporter

The phenomenal surge in United States oil exports over the last year has grabbed headlines and defied all expectations of the impact of the December 2015 lifting of the US crude ban. Lost in the excitement is the fact that the volumetric growth in US crude exports - which averaged 1.5 million barrels per day since September 2017 - has been associated with an equally important though a less visible shift in the quality of US crude production.

Over the last two weeks, the UAE has received three shipments of light crude oil from the United States. When the shipping data is paired with the dramatic increase of production in Texas it reveals that the US is becoming a global exporter of oil, something that would have been unheard of a few years ago. But while the US is quickly establishing itself as a surprisingly large oil exporter, with an already wide marketing reach, it is also a niche player, with exports entirely concentrated at the very light end of the barrel, in condensate and ultra-light crude oil. As production continues to increase, so will it also become increasingly light, with potential implications for pricing.

The increased production in Texas is mainly light crude, or crude oil with a high API, which is coming out above historic levels, as pictured in the graph below. Kayrros data provides an insight into the gains in Texas and the beginnings of the exports to the Ruwais refinery. Using well test data, Kayrros is able to matchup production volumes to their API gravity. With this information, Kayrros can then estimate production volume by API gravity per basin.

Light crude oversupply: The US has seen a dramatic increase in light crude oil produced in Texas over the preceding months. Most of the growth can be attributed to the Delaware sub-basin (chart below), which has experienced a serious upsurge in the production of light crude graded 45.1 API and above.

With Kayrros machine learning forecasting we are able to anticipate trends in production growth, which allows us to figure out if this is an outlier or a developing trend.

The Ruwais refinery currently operates with light crude at 650,000 kb/d. A project has been planned to allow the refinery to process medium-sour crude in order to export more-valuable Murban crude. This should impact US shipments in the long run, as an increased demand for light crude comes at the same time as an increase in production of light crude in Texas.

Short-term impact of Qatar export Ban: After the ban on oil from Qatar announced on 5 June 2017, shipments from the nation to the UAE have dropped dramatically, opening up the field to other major players.

Before the ban was put into effect, Qatar was sending about two shipments of condensate per month to the UAE, but now, post-ban, only one shipment to Fujairah has been received since October. Qatari oil is now being shipped to Asia, as the UAE processed no imports of light crude from Qatar between October and February. This has left a major gap in the market for shipments of condensates, which Texas and Saudi Arabia is more than eager to fill.

Since Kayrros tracks more than 14,000 ships around the globe and measures floating crude storage, we can understand the change in import-export dynamics, providing a headstart on the market. 

Before the Qatar ban in June 2017, imports were constant and all of the light crude oil (Dukhan crude grade) and condensate (NFC II grade) were coming from Qatar, with additional imports of medium crude oil from Kuwait, Saudi Arabia, and Qatar. Now that the shipments are going to Asia, The United States and Saudi Arabia have been filling the gap left by the ban.

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